1990 Market Reform Act Spearheaded by Markey Gave SEC Regulatory Powers It Now Needs to Use
WASHINGTON, D.C. – Representative Edward J. Markey (D-Mass.), a senior member of the House Energy and Commerce Committee today released a letter he sent to SEC Chairman Mary Schapiro urging her to harmonize the circuit breakers on our nation’s security exchanges in order to limit the potential for computerized trading to artificially increase market volatility. The lawmaker’s letter comes in the wake of last Thursday’s volatile trading session on Wall Street in which the Dow Jones Industrial Average dropped by nearly 1,000 points before making up much of those losses later in the day.
“As we saw last Thursday, markets can free fall in a matter of minutes due to computerized trading, without any safeguards on place to break the fall,” said Markey. “I urge the SEC to use all of its available authority to harmonize the circuit breakers on our nation’s security exchanges to prevent these types of precipitous drops from happening in the future.”
In 1990, when Rep. Markey was the chairman of the Subcommittee on Telecommunications and Finance, he was the principal author of H.R. 3657, the Market Reform Act of 1990, a bill which President George H.W. Bush signed into law on October 16, 1990 (see Public Law 101-432). The Market Reform Act included specific authority for the SEC to "prohibit or constrain, during periods of extraordinary market volatility, any trading practice...that the Commission determines (A) has previously contributed significantly to extraordinary levels of volatility that have threatened the maintenance of fair and orderly markets; and (B) is reasonably certain to engender such levels of volatility if not prohibited or constrained."
Almost two years ago, Rep. Markey wrote to then SEC Chairman Christopher Cox, asking him to take certain actions to strengthen stock market circuit breakers in response to the volatility that was affecting our nation’s equity marketplace at the time. Chairman Cox never responded.
In addition, Markey noted in his letter to Chairman Schapiro that another provision of the Market Reform Act which has still not been implemented, gave the SEC the power to require all large traders to report to the Commission information about trades—something which would better enable the SEC staff to reconstruct trading and monitor disruptions in the market such as that which occurred last week. Markey urged the SEC to quickly move forward to adopt a strong large trader reporting rule.
A full copy of Markey’s letter to Schapiro can be found here: http://markey.house.gov/docs/ejmletterschapiro.pdf
A full copy of Markey’s letter to Cox can be found here: http://markey.house.gov/docs/finance/letter_sec_program_trading_093008.pdf
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